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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 17, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Amita Question by Amita on Dec 19, 2023Hindi
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Hello, I hope you're well. I allocate my monthly investments as follows: 7.5k in Quant Tax Fund, 5k in DSP ELSS Fund, 5k in DSP Nifty 50 Equal Weight Index Fund, 1.5k in Navi Nifty India Manufacturing Index Fund, 2k in Axis Gold Fund Direct Plan Growth, 1k in HDFC Gold Fund Direct Growth, 2k in Nippon Indian Silver ETF, 2k in Quant Multi Asset Fund Growth Option Direct Plan, 2k in Nippon India Multi Asset Fund, 3k in Canara Robeco Bluechip Equity Fund, 2k in Nippon India Large Cap Fund, 5k in Quant Small Cap Fund, 5k in Nippon Small Cap, 3k in Axis Small Cap, 5k in HDFC Multi Cap, 2k in Tata Digital India, 3k in Axis Growth Opportunities Fund, 2k in Nippon Flexi Cap, 2k in Parag Parik Flexi Cap, 2k in Quant Mid Cap, 1k in Edelweiss Aggressive Hybrid, and 2k in DSP Natural Resources and New Energy. How are these companies, and is my fund allocation correct? Also, could you provide an estimate of the corpus I might accumulate in the next 5 years with a monthly SIP of 66k?

Ans: Your investment portfolio is diversified across various categories and funds, which is good for spreading risk. However, the sheer number of funds might lead to over-diversification and higher costs. Consider consolidating similar funds to streamline your portfolio. To estimate corpus in 5 years with ?66k monthly SIP, assuming an average annual return of 10%, you might accumulate approximately ?50 lakhs to ?55 lakhs.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

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Dear sir, This is Capt. Samir Kukreja. I have started investing 35k per month from this month in SIP format (monthly) 1) DSP-Global innovation FOF-Reg fund -G -3000 Sip 2)WHITEOAK flexi cap reg fund- 3000 SIP CANARA REBECCO-3000 SIP 3) HDFC Business fund- 200000 LUMPSUM(one time) 4)HDFC top 30 fund - 3000 SIP 5)Aditya Birla frontline equity fund - 3000 SIP 6)DSP small cap fund- 5000 7)HDFC small cap fund- 5000 8)Merai asset large cap fund-5000 9)ICICI prudential Blue chip fund-5000 All of the above are regular growth plans. Kindly advise as to what would be my corpus after 10-12 yrs from now
Ans: Captain Kukreja, your commitment to investing is commendable! Estimating the corpus after 10-12 years requires considering various factors like market performance, fund performance, and consistency of investments. However, with your diversified portfolio and regular investments, you're on the right track towards building a substantial corpus.

To get a more accurate estimate, consider the historical performance of your selected funds, the expected rate of return, and the compounding effect over time. Additionally, review your investment strategy periodically and make adjustments as needed to stay aligned with your financial goals.

Consulting with a Certified Financial Planner can provide personalized projections based on your investment portfolio and risk tolerance. They can help optimize your investment strategy to maximize returns and achieve your long-term financial objectives. Keep up the disciplined investing, and your efforts will likely yield significant results over time.

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 05, 2024

Money
Hello, This is Capt. Samir. I have invested in mutual funds and doing an SIP of 70k per month. Would like to know if the mutual funds that I have invested in are good to hold and the corpus that can be generated in the next 10 years. I am looking forward for a 2 cr corpus by 2034 from MF. Kindly advise if SIP needs to be increased to generate the said corpus. Mutual Funds DSP-Global innovation FOF-Reg fund -G -3000 Sip WHITEOAK flexi cap reg fund- 3000 SIP CANARA REBECCO Mid cap fund - 3000 SIP HDFC Business fund- 200000 LUMPSUM HDFC top 30 fund - 3000 SIP Aditya Birla frontline equity fund - 2 folios - 3000 SIP in one only DSP small cap fund- 5000 HDFC small cap fund- 5000 Merai asset large cap fund-5000 ICICI prudential Blue chip fund-5000 Canara Rebecco manufacturing fund Growth - 5000 Kotak focused equity fund -5000 JM midcap fund Growth - 5000 SBI ENERGY OPPORTUNITIES FUND - 400,000 LUMPSUM Kotak Multicap fund: 5000 ICICI PRU energy and fund: 5000 HDFC Nifty 200 momentum30 index fund- 10000 HSBC EXPORT OPPORTUNITIES FUND - 3L lumpsum Thanks Samir
Ans: It’s great to see that you are already investing consistently and have a target in mind. Your aim of generating Rs 2 crore by 2034 from mutual fund investments is achievable with a systematic approach. Let's break down your current investment strategy and assess whether any adjustments are needed to meet your goal.

Review of Your Existing SIPs and Lump Sum Investments
You are currently investing Rs 70,000 per month through SIPs and have made some lump-sum investments as well. Let's evaluate the funds you have chosen based on their category, diversification, and potential for long-term growth.

Global Innovation Fund: This fund gives you exposure to international markets, which helps diversify your portfolio. Keep an eye on global market trends, but this fund can add value if the global tech and innovation sectors grow.

Flexi Cap and Mid Cap Funds: Flexi Cap and Mid Cap funds offer a balance of growth potential and risk. They tend to outperform in the long run, but they also come with volatility. These funds are good to hold for a long-term horizon.

Lump Sum Investments in Sector-Specific Funds (Energy and Manufacturing): Sector-specific funds can be high-risk but may offer high returns if the sector performs well. The energy sector has potential but may be volatile due to factors like government policies, oil prices, and global energy trends. Manufacturing is more stable but less likely to deliver aggressive returns. Keep these funds for diversification, but be cautious.

Small Cap Funds: You have exposure to two small cap funds. While small cap funds can offer high returns, they come with high volatility. Keep in mind that small cap funds should ideally not exceed 20% of your portfolio due to their risk profile.

Large Cap and Blue Chip Funds: Large Cap funds are a safer bet in the long term and provide stability. They might not offer the highest returns but will protect your capital. Continue your SIPs in these funds.

Focused Equity Funds: These funds invest in a limited number of stocks, which can give concentrated returns but also carry higher risk. As you are looking for a long-term goal, these funds can add value, but balance them with more diversified funds.

Index Funds: While index funds are low-cost, they track the index and may not offer outperformance. Actively managed funds can give you better returns over the long term. If you are invested in index funds, consider reviewing their performance and reallocating to actively managed funds with a Certified Financial Planner.

Is Your Portfolio Diversified Enough?
Your portfolio has a good mix of different fund categories—small cap, mid cap, flexi cap, and large cap. You also have exposure to international markets and sectoral funds. However, be cautious about over-investing in small caps and sectoral funds due to their high volatility. Consider reducing the allocation to sectoral funds if their performance dips.

Will You Achieve Rs 2 Crore by 2034?
You aim to accumulate Rs 2 crore by 2034. Based on your current SIP amount, it is important to assess if this is enough. Considering an average return of 12% per annum from your mutual funds, Rs 70,000 per month SIPs may get you close to your target. However, it is wise to periodically review your portfolio and step up your SIP amount by 10-15% every year to stay on track.

Recommendation:

Increase your SIP amount: If possible, increase your SIPs by 10% every year to boost your corpus and mitigate the impact of inflation.
Step-Up SIPs: Some mutual funds offer a "Step-Up SIP" option where you can increase your monthly SIP amount automatically by a fixed percentage every year. This will help you stay on track for your Rs 2 crore goal.
Lump Sum vs SIPs
Lump sum investments can boost your corpus, but they depend on market timing. Since you already have a few lump-sum investments, it’s good to continue with SIPs to average out market volatility. If you come into additional funds, like a bonus or windfall, consider allocating some towards lump sum investments in diversified funds.

Expense Ratios and Fund Performance
It’s important to regularly monitor the expense ratios of the funds you are invested in. High expense ratios can eat into your returns over the long term. Actively managed funds with high expense ratios should justify the cost with higher returns. If you find that the returns are not justifying the high costs, consult a Certified Financial Planner to switch to better-performing funds with reasonable expenses.

Managing Risk and Rebalancing
Your current portfolio leans towards high-risk, high-return funds like small caps and sectoral funds. As you approach your target year, start reducing exposure to high-risk funds and shift more towards stable funds like large caps and flexi caps. This will help preserve your capital and reduce volatility.

Every year or two, review your portfolio and rebalance it. For example, if small caps have outperformed, they may now constitute a larger portion of your portfolio than you originally planned. Rebalance by selling some small cap units and buying more large cap or flexi cap units.

Emergency Fund and Insurance
Apart from investing in mutual funds, ensure that you have an emergency fund that covers 6-12 months of your expenses. This will protect you from dipping into your investments in case of unforeseen financial needs.

You already have a term insurance plan, which is great. Ensure that the sum assured is adequate to cover your family's financial needs in case of an emergency.

Tax Planning
Remember to account for taxation when planning your investment strategy. Long-term capital gains (LTCG) on equity mutual funds are taxed at 10% for gains above Rs 1 lakh. Plan your withdrawals strategically to minimize tax liabilities.

You can also invest in ELSS (Equity Linked Savings Scheme) funds to save on taxes under Section 80C. ELSS funds have a 3-year lock-in period and provide both tax benefits and market-linked returns.

Final Insights
Your current portfolio is well-diversified but high on risk.
Keep track of expense ratios and switch funds if necessary.
Step up your SIPs annually by 10-15% to meet your Rs 2 crore target.
Rebalance your portfolio every year to manage risk.
Maintain an emergency fund and ensure adequate insurance coverage.
Consider tax-saving strategies like ELSS to optimize your investments.
With a disciplined approach and periodic reviews, your goal of Rs 2 crore by 2034 is achievable.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Asked by Anonymous - Nov 22, 2024Hindi
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A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

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Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

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My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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